Choosing The Right Payment Gateway

Payment Gateway Fees and Charges

Online shopping carts and e-commerce have changed the face of modern shopping, but how do you pick the right payment gateway for your own online business?

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If you’re interested in e-commerce and selling your products and services online, there are now more than a dozen ways to accept credit card payments via your website.

It’s great to have options, but how do you pick the payment gateway that’s right for you? And how do you ensure you’re getting a fair deal?

Existing businesses that already have a good customer base with dependable turnover would normally obtain a merchant account from their bank, and then apply to a compatible online payment gateway. These payment gateways are fairly compatible with all banks, so it may pay to shop around.

Beware of excessive fees
Banks normally charge a Merchant Service Fee or percentage fee on transactions, and payment gateways normally charge a minimum monthly fee that includes a set number of free transactions. Always be sure to price banks fees and gateway fees together when making comparisons, because a particular bank’s fee may differ depending on the gateway chosen.

A number of banks and payment gateways charge large setup and high monthly fees, and some banks will even charge a transaction fee of 8 percent. These transaction charges are applied to your total retail price, so if you are selling your products on a 10 percent mark-up, that 8 percent transaction fee will quickly eat into your gross profit.

The best deal for most website owners is being charged around 2 percent for ‘card not present’ transactions, however 3 to 4 percent is more common. This is a unique rate for online businesses where a physical credit card is never swiped or sighted, because the bank is taking a risk that the card number used may have been fraudulently obtained.

Think of the long term costs
For new businesses unsure of their future earning potential, it will be near impossible to beat the transaction fees offered by the likes of PayPal, PayMex or PayMate.

These low cost gateways offer the ability to accept payment by credit card payments via your website with no setup or monthly fee. Instead, they all have fixed transaction fees of around 3 percent, plus 50 cents, give or take.

It pays to consider this fee if you have more lower value transactions. The 50 cent fee is equivalent to 2.5 percent on a $20 transaction or 0.5 percent on $100, and can add up quickly if you find you sell a large quantity of low cost items.

The only other potential issue with services such as PayPal is that the merchant account is actually owned by that third party. This generally means a delay of an extra business day before you receive payment, but can also lead to problems with refunds and charge backs.

Credit cards and foreign currency
When selecting your payment gateway be sure to also consider which credit cards you choose to accept as some credit card providers may have differences in the time they take to settle, in their transaction fees, and in any monthly and setup fees.

If you’re targeting overseas buyers and wish to accept multiple currencies, there’s a great deal more to think about than the obvious need to be able to accept payment in a foreign currency.

You’ll also need to look into where that payment will end up and what currency conversion fees will be charged (sometimes 2 percent).

There is a significant difference between a currency convertor and a multiple currency shopping cart, and a quality shopping cart system should be compatible with multiple currencies. Each product must have fixed prices in each currency so that prices won't change day to day. The benefit of offering checkout in multiple currencies is ease of use for the customer, and customer trust in the true value of the purchase.

Doing your homework before deciding which payment gateway is right for you can help ensure better returns for your business.

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